A lot of people are, understandably, interested in demolishing all of their debt and that includes figuring out how to pay off a mortgage quickly. It’s an admirable goal, and living a debt-free life can open doors to a whole new world of possibilities.
Want to travel around the globe? Cool—with some careful planning, a valid passport, and savvy saving, the sky’s the limit!
Ready to quit your job to homeschool the kids? You can afford to type up that resignation letter and start surfing Pinterest for curriculum ideas.
Dream about filling a bathtub up with quarters and bathing in it like you’re Scrooge McDuck? Well, that’s kind of weird, my friend, but I’m not here to judge you.
Eliminating your monthly mortgage payment can significantly increase your cash flow—and just about everyone likes having extra money on hand. So let’s talk about how to pay off a mortgage faster.
How to Pay Off a Mortgage Quickly
Okay, let’s do this in five quick tips. Ready?
#1 Pay More
Let’s start with number one, because starting with any other number wouldn’t make much sense: pay more. Yep. Have more money and then budget that money to pay more towards your mortgage. Presto Change-o, no more mortgage.
So, yeah, that one’s important. Top notch personal finance advice, truly.
And then the next step is…well, wait, it will come to me. Okay, you know what? I forgot the other four. There were going to be five. Number one is to pay more, and that’s a good one. I had a strong start here.
Alright, I guess it’s just the one tip, which is a bummer because five tips sounds better, and frankly, number three would have amazed you, but to pay off your home loan quickly, you have to pay more.
However, this one tip is such a good tip, I think it’s fair to expand upon it.
How to Pay More to Pay Off Your Mortgage
#2 Increase Frequency of Mortgage Payments
It seems like cheating to start on number two when this is really a new list now, you might be thinking, but what you need to be thinking about is how to pay off your mortgage quickly. Focus, people!
A quick and relatively painless way to pay more towards your mortgage payment is to pay bi-weekly instead of monthly. Breaking your payments into two each month, even if you don’t increase the overall amount of your monthly payment, results in one extra payment each year.
With 52 weeks in a year, bi-weekly payments means you’ll make 26 total payments, or 13 monthly payments…without impacting your monthly budget much.
Check out YNAB’s Loan Planner tool to see how how making extra payments will affect your own outcome!
#3 Make Extra Payments Towards Mortgage Principal
When putting extra money towards your mortgage, it’s important to specify to your mortgage company that you want the overage applied to principal.
Interest makes up a significant portion of your mortgage, and since it’s calculated on the principal balance, paying down the principal reduces the amount of interest that you’ll pay on a fixed-rate loan.
That extra payment you’ll be making in the above bi-weekly scenario? Mark it as going towards your principal for that extra debt paydown oomph.
#4 Refinance to a Shorter Loan Term
If you have a traditional 30-year fixed rate mortgage, refinancing to a 15-year loan means you’d be paying it off in…15 years.
(The good advice just doesn’t stop here, folks, and it’s free!)
Yes, your monthly payment will be higher and you’re likely to have some closing costs associated with this plan but 15-year mortgages often come with a lower interest rate and you’ll be paying a lot less interest over the life of the loan due to the reduced timeline.
#5 Get Clear on Priorities
When YNAB’s founder, Jesse Mecham, was 25 years old, he had a new baby and didn’t own a home yet, so he did what any normal 25-year-old would do (no, not really) and wrote “Pay off mortgage by the time I’m 30” on a notecard and stuck it in his wallet.
And then he did it. Do you know how?
(Okay, we just went through this whole “you have to pay more” thing and you don’t know how?)
Let’s move on to why then:
Because he wanted to. He wanted that so much that he stayed focused on it. He lived in a mostly unfurnished home that echoed a lot and his friends and family members thought it was all very odd. He worked harder and he sacrificed other things because he wanted to pay a mortgage off enough to write that down on a notecard and stick it in his wallet before he even had a mortgage.
So decide if you want to pay off your mortgage quickly. If that’s not one of your financial goals, that’s okay. A lot of people don’t mind having a mortgage; interest rates are low, real estate is an investment, maybe they have a prepayment penalty, or have student loans that take precedence, but for whatever reason, it’s not high on their priority list. There’s nothing wrong with that.
Paying a mortgage off quickly has to be your priority if you want to make it happen. You choose your own intensity; maybe you get a side hustle, perhaps you skip take-out and vacations, but you pay more and you feel good doing it because you’re working towards something you really want.
And one day you’re sitting in your bathtub full of quarters in that home that you own free and clear, thinking, “That YNAB writer said this was weird, but so was the way she numbered that list.”
I’m looking forward to that day for you, because it will all have worked out well for both of us.
Ready to find room in the budget to pay more towards your mortgage? Try YNAB free for 34 days.